Accurate Price Model for Trading Smart Money Concepts SMC (=
If you trade Smart Money Concepts SMC, there is one single pattern that you should learn to identify.
In this article, you will learn an accurate price model that you can use to predict a strong bullish or bearish movement way before it happens.
Read carefully and discover how to track the silent actions of smart money on any market.
The only thing that you need to learn to easily find this pattern is basic Structure Mapping . After you map significant highs and lows, you will quickly recognize it.
This SMC pattern has 2 models: bullish and bearish ones.
Let's start with a bearish setup first.
Examine a structure of this pattern
it should be based on 2 important elements.
The price should set a sequence of equal lows.
These equal lows will compose a demand zone.
The area where a buying interest will concentrate.
The minimum number of equal lows and lowers highs should be 2 to make a model valid.
Exhausting of bullish moves will signify a loss of confidence in a demand zone . Less and less market participants will open buy positions from that.
At some moment, a demand zone will stop holding. Its bearish breakout will provide a strong bearish signal , and a bearish continuation will most likely follow.
This price model will signify a market manipulation by Smart Money.
They will not intentionally let the price fall, not letting it break a demand zone. A buying interest that will arise consequently will be used as a source of liquidity.
Smart money will grab liquidity of the buyers, silently accumulating huge volumes of selling orders.
Once they get enough of that, a bearish rally will start, with a demand zone breakout as a trigger.
Though, the chart model that I shared above has a strong bullish impulse, preceding its formation, remember that it is not mandatory.
The price may also form a bearish impulse first and for a pattern then.
Each bullish movement that initiates after a formation of an equal low should be weaker than a previous one.
So that the price should set a lower high every time after a formation of an equal low.
Look at a price action on USDCHF forex pair. Way before the price dropped, you could easily identify a market manipulation of Smart Money and selling orders accumulation.
A breakout of a horizontal demand zone was a final bearish confirmation signal.
Let's study its bullish model.
It has a similar structure.
The price should set a sequence of equal highs, respecting a horizontal supply zone.
Each bearish move that follows after its test should have a shorter length, forming a higher low with its completion.
This model will be also valid if it forms after a completion of a bearish impulse.
Weakening bearish movements will signify a loss of confidence in a supply zone, with fewer and fewer market participants selling that.
Its bullish breakout will be an important even that will confirm a highly probable strong bullish continuation.
Smart Money will use this price model to manipulate the market and accumulate buying orders, not letting the price go through a supply zone. They will grab a liquidity of the sellers each time a bearish move follows from a supply zone.
When they finally get enough of a liquidity, a bullish rally will initiate and a supply zone will be broken , providing a strong confirmation signal.
That price model was spotted on GBPJPY forex pair.
Smart Money were manipulating the market, not letting it continue rallying by creating a significant horizontal supply zone.
Selling orders that were executed after its tests provided a liquidity for them.
A bullish breakout of the underlined zone provides a strong bullish confirmation signal.
A breakout and a future rise could be easily predicted once this price model appeared.
Why they do it?
But why do Smart Money manipulate the markets that way?
The answer is simple: in comparison to retail traders, they trade with huge trading orders . To hide their presence and to not impact market prices much, they split their positions into a set of tiny orders that they execute, grabbing the liquidity.
The price model that we discussed today is the example how they do it.
The important thing to note about this pattern is that it efficiently works on any market and any time frame. You can use that for scalping, day trading, swing trading. And it can help you find great investing opportunities.
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